Trade deals could help President Obama with business
By: Joseph J. Schatz and Dave Clarke December 3, 2012 11:19 PM EDT

Following an election that pitted President Barack Obama against the business community, next year may be a time for the two sides to find common ground.

But making amends may be easier to do overseas than at home.

Obama, intent on boosting U.S. exports, wants a Pacific Rim trade deal by the end of 2013 — and it’s a key priority for House Republicans and U.S. companies, including financial firms like Citigroup and JPMorgan Chase, which operate around the world. Plus, hopes are high that the administration will start negotiations early in 2013 over a major trade and investment pact with the European Union.

The international trade deals give Obama the chance to champion U.S. economic interests abroad even as the business community continues to grumble that his policies at home are crimping their profits.

“I believe this is an ideal moment to work with Congress and the administration on an ambitious free-trade agenda,” U.S. Chamber of Commerce President Tom Donohue told the chamber’s board of directors last week.

Still, Obama’s credentials as a free-trade advocate are suspect among many in the business and foreign policy communities. And Republicans remain frustrated that Obama has not yet requested so-called fast-track trade negotiating authority, which would be needed to push any final trade deal through the 113th Congress.

The administration’s foreign economic policy team is also facing serious turnover, with point man Treasury Secretary Timothy Geithner heading for the exits.

On trade, U.S. Trade Representative Ron Kirk is also set to leave his post, with Michael Froman, deputy national security adviser for international economic affairs, seen as a top candidate to replace him. And Rebecca Blank, who heads the Commerce Department, still has an “acting” next to her title.

How those trade positions are filled will be “important signals to the business community,” said the chamber’s senior director for international policy, Christopher Wenk.

If trade deals are made, they probably wouldn’t hit the House or Senate floor until late 2013, at the earliest. But Obama will have other chances to weigh in on foreign economic policy in 2013, most notably when it comes to international taxation. Corporate leaders are betting that congressional tax writers and the White House can work out a long-awaited tax overhaul in 2013 that moves the United States closer to a territorial tax system.

But Obama has repeatedly proposed measures aimed at penalizing companies that keep earnings overseas and rewarding those that invest in the United States.

And the Business Roundtable, a prominent group of CEOs, is already working to shape perceptions and ensure that lawmakers view multinationals as integral to the U.S. economy, not a target for tax hikes.

In a study being released Tuesday, the Roundtable and the United States Council for International Business note that “the success of American companies, and of the U.S. workers they employ, increasingly hinges on their success as globally engaged companies.”

International trade has been one area of cooperation between Obama and House Republicans over the past two years, but it has been far from a perfect relationship. The Obama administration frustrated corporations by tinkering with parts of long-stalled trade accords with South Korea and Colombia before finally sending the two pacts, along with a Panama deal, to the House and Senate floors in late 2011.

A reauthorization of the Export-Import Bank earlier this year sparked a fight between the tea party wing of the GOP and its business supporters before finally becoming law. And after more than a year of sniping over Russia’s human-rights record, legislation normalizing trade relations with Moscow was passed by the House last month and awaits final action in the Senate.

None of those items would be considered heavy lifts in less partisan times.

“Trade was one of very few issues where we were able to achieve bipartisan results,” Wenk said. “I think we have to kind of see what the administration wants to do on trade. … Hopefully, they want to do big things on trade.”

Publicly, at least, the Obama administration has been pushing the Trans-Pacific Partnership talks — which include Australia, Brunei, Canada, Mexico, Chile, Malaysia, New Zealand, Peru, Singapore and Vietnam — as a counterpoint to Chinese economic influence in Asia, where competing trade pacts, which don’t include the United States, are gaining in popularity.

Both sides are awaiting the release of a high-level government report this month that will most likely endorse the idea of a U.S.-EU deal.

Such an effort would also require the U.S. government and the European Union to resolve a host of persistent trade disputes in several industries.

Talk of a U.S.-EU trade deal has yet to get much buzz on Capitol Hill. Still, Senate Finance Committee Chairman Max Baucus (D-Mont.) discussed the issue when he traveled to Europe before the election.

And in Europe, labor and environmental standards are high, making the traditional U.S. political fights over trade less of a hurdle.

“I don’t think there’s going to be as big a conflict with the administration as there has been on other trade issues,” National Foreign Trade Council President Bill Reinsch told POLITICO. “Our sense right now is that neither TPP nor a U.S.-EU agreement is likely to be as controversial as Colombia was, for example.”

Still, the TPP negotiations have also raised concerns among Internet privacy groups who worry that the pact will serve as a backdoor route to Internet regulation. And consumer groups like Public Citizen regularly argue that trade pacts like the TPP infringe on U.S. and foreign financial regulations.

U.S. officials say those fears are unfounded.

Trade agreements and similar efforts to open foreign markets to U.S. companies are a top priority for financial firms, and particularly large banks.

For U.S. banks, the regulatory crackdown following the financial crisis makes finding ways to make money abroad even more enticing.

“They always want to make sure that nothing gets in the way of their expansion internationally because they aren’t expanding nationally,” said Nancy Bush, a bank analyst and contributing editor at SNL Financial.

Like other global companies, U.S. financial giants want the cost of doing business abroad to be brought down and for countries with less sophisticated financial systems to agree to modernize things such as how they go about writing and implementing regulations.

The laws governing how data is treated is a top concern for large U.S. banks. For instance, Europe tends to have stricter privacy standards for customer information and a trade deal that could ease these differences with U.S. standards would benefit large U.S. financial firms.

With the Doha round of global trade negotiations dead, banks are also pushing for an international services agreement to be struck. That would help U.S. firms gain more access to a country’s financial markets by easing restrictions on investments and requirements that a foreign firm set up subsidiaries.

Following the financial crisis, there has been an effort by regulators to better harmonize banking regulations through international deals outside of trade agreements. But international regulators are still working through things such as how derivative markets should be governed and how creditors should be treated in different countries if a large bank fails.

In their effort to push back against Dodd-Frank regulations, banks have argued that if other countries do not adopt similar rules, U.S. lenders will be at a competitive disadvantage.

In a sign that the playing field will be leveled at least within U.S. borders, Federal Reserve Governor Daniel Tarullo, the central bank’s point man on regulation, made the case in a November speech to apply the same rules to the U.S. operations of foreign banks that govern their large U.S. counterparts — a change from the current system.

“Our regulatory system must recognize that while internationally active banks live globally, they may well die locally,” he said.